Komatsu Earnings: Fair Value Cut by 6% Reflects Reactionary Sales Fall of Mining Equipment in 2025

We cut our fair value estimate for narrow-moat Komatsu by 6% to JPY 5,060, as we trimmed our companywide sales estimate by 5.4% and lowered the companywide operating margin assumption to 13.5% from 16% for fiscal 2025. Sales grew strongly in regions with high exposure to mining equipment, such as Asia and Oceania, in fiscal 2024, at 14.1% and 24.2%, respectively, surpassing our previous estimates of 4.4% and 20.2%. However, given the uncertainty brought by undecided US tariff policies and the recent softening price movement for resources such as coal, a reactionary sales fall is more likely to happen in fiscal 2025, especially in the regions with a high portion of mining equipment sales. Hence, we cut our sales estimates by 6% and 14% for Asia and Oceania, assuming sales will drop year on year by 10% and 12%, respectively, in fiscal 2025.